Portfolio overview

The Health portfolio works towards achieving better health and wellbeing for all Australians, now and for future generations. A total of 19 entities make up the portfolio.

The Department of Health is the lead entity in the portfolio. It is responsible for achieving the Australian Government’s health outcomes in the areas of health system policy, design and innovation; health access and support services; sport and recreation; individual health benefits; regulation, safety and protection; and ageing and aged care. This includes administering programs and services, such as Medicare and the Pharmaceutical Benefits Scheme, and forming partnerships with the states and territories, as well as other stakeholders. Further information is available from the department’s website.

The remaining 18 entities in the portfolio are responsible for the delivery of programs, including aged care accreditation services, digital health reforms, the development and reporting of health and welfare data, nuclear safety, supporting the integrity of sport, funding medical research, managing blood supplies, cancer research, pricing and funding public hospitals, national safety and quality standards and clinical care standards, and food safety.

In the 2019–20 Portfolio Budget Statements (PBS) for the Health portfolio, after accounting for Portfolio Additional Estimates Statements (PAES), the aggregated budgeted expenses for 2019–20 total $77.82 billion. The PAES contain budgets for those entities in the general government sector (GGS) that receive appropriations directly or indirectly through the annual appropriation acts.

The level of budgeted departmental and administered expenses, and the average staffing level for entities in the GGS within this portfolio, are shown in Figure 1. The Department of Health represents the largest proportion of the portfolio’s expenses, and administered expenses are the most material component, representing 98 per cent of the entire portfolio’s expenses.

Figure 1: Health portfolio — total expenses and average staffing level by entity

Source: ANAO analysis of 2019–20 PBS and 2019–20 PAES.

Audit focus

In determining the 2020–21 audit work program, ANAO considers prior-year audit and other review findings and what these indicate about portfolio risks and areas for improvement, and emerging risks from new investments, reforms or changes in the operating environment. In the Health portfolio, strategic risks predominantly relate to service delivery through other entities, and governance issues. In 2019–20 and into 2020–21, the department and its Chief Medical Officer led the government’s response to the COVID-19 pandemic, acting as the primary source of health advice. The pandemic environment results in heightened risks relating to the timeliness of data collection and analysis to inform response mechanisms, rapid policy development, stakeholder engagement, and record keeping of key decisions and inputs to those decisions.

Governance

The Department of Health implements a large number of national strategies and will need to further embed strong project management mechanisms that work across the organisation to achieve success. Audit work has identified challenges in recording and assessing implementation progress, monitoring the ongoing impacts of aged care policies, delivering value for money on large-scale investments, and monitoring the implementation and impact of departmental efficiency savings.

Health is responsible for the procurement of the National Medical Stockpile, which is critical in a health pandemic to ensure reliable supply and distribution, and to ensure goods procured meet health sector needs.

The distribution of roles and responsibilities in the delivery of Australia’s health services requires ongoing collaboration between Australian Government entities, state and territory entities and a range of stakeholders in the private sector. This includes monitoring performance and outcome measures under intergovernmental agreements.

The department is the primary source of information collection, data analysis, health communications and policy advice during a pandemic. This requires strong governance and quality controls, active risk management arrangements, stakeholder management and engagement, and reliable data and intelligence collection systems.

Service delivery

The Department of Health is heavily reliant on other entities for the delivery of programs, including through the administration of Medicare and aged care payments by Services Australia, administration of grants through the Department of Social Services and the National Health and Medical Research Council, and provision of digital health services through the Australian Digital Health Agency. The risks associated with these arrangements need to be actively managed by the department to ensure that service and quality control expectations are agreed and maintained, and that its business is appropriately prioritised, to provide assurance that policy objectives are being met. Service delivery risks are heightened in an emergency environment, where there is significant demand for additional services and information, and rapid policy and legislative change.

Grants administration

Accuracy and occurrence of grant payments is a key risk, considering the significant number of grant programs that are administered by the Department of Health and other portfolio entities. Audit activity has highlighted risks where grant funding was not informed by an appropriate assessment process and sound advice, and from shortcomings in value-for-money assessments, and performance monitoring and reporting arrangements.

Regulation

Protecting the health and safety of the community through the regulation of health products and services is the responsibility of entities including the Therapeutic Goods Administration, the Office of the Gene Technology Regulator and the Aged Care Quality and Safety Commission. For regulators operating under charging arrangements, the application of cost recovery principles involves recovering the efficient costs of activities.

Financial statements and other audit engagements

Overview

Entities within the Health portfolio, and the risk profile of each entity, are shown in Table 1.

Table 1: Health portfolio entities and risk profile

 

Type of entity

Risk of material misstatement

Number of higher risks

Number of moderate risks

Material entities 

Department of Health

Non-corporate

Moderate

3

4

National Blood Authority

Non-corporate

Low

0

1

National Health and Medical Research Council

Non-corporate

Low

1

1

Non-material entities 

Australian Aged Care Quality and Safety Commission

Non-corporate

Low

 

Australian Commission on Safety and Quality in Health Care

Corporate

Low

Australian Digital Health Agency

Corporate

Low

Australian Institute of Health and Welfare

Corporate

Low

Australian National Preventive Health Agency

Non-corporate

Low

Australian Radiation Protection and Nuclear Safety Agency

Non-corporate

Low

Australian Sports Commission

Corporate

Low

Australian Sports Anti-Doping Authority

Non-corporate

Low

Australian Sports Foundation Limited

Company

Low

Cancer Australia

Non-corporate

Low

Food Standards Australia New Zealand

Corporate

Low

 

Independent Hospital Pricing Authority

Corporate

Low

National Health Funding Body

Non-corporate

Low

National Mental Health Commission

Non-corporate

Low

Organ and Tissue Authority

Non-corporate

Low

Professional Services Review Scheme

Non-corporate

Low

     

Material entities

Department of Health

The Department of Health is responsible for achieving the Australian Government’s health and ageing priorities through evidence-based policy, program administration, research, regulatory activities, and partnerships with other government entities, consumers and stakeholders.

The department’s total budgeted expenses for 2019–20 are $74.59 billion, with 66 per cent of these expenses attributable to personal benefits payments, as shown in Figure 2.

Figure 2: Department of Health’s total budgeted expenses by category ($’000)

 

Source: ANAO analysis of 2019–20 PAES.

The seven key risks for the department’s 2019–20 financial statements that the ANAO has highlighted for specific audit coverage in 2019–20, including those that the ANAO considers potential key audit matters (KAMs), are the:

  • payment of aged care subsidies to nursing home providers based on Aged Care Funding Instrument assessments prepared by the same providers. These payments involve judgements regarding the level of care (KAM – Accuracy of payments of personal benefits and subsidies);
  • complexity and high volume of transactions processed by Services Australia on behalf of the Department of Health using ageing IT systems for personal benefit payments, including the Medicare Benefits Scheme, the Pharmaceutical Benefits Scheme and the private health insurance rebate (KAM – Accuracy of payments of personal benefits and subsidies);
  • estimation of revenue under the Therapeutic Goods Act 1989, which involves judgements and assumptions related to the assessment of application, assessment and inspection fees, and associated exemptions;
  • complexity and judgements involved in calculating Pharmaceutical Benefits Scheme drug recovery revenue using data sourced from Services Australia;
  • estimation of outstanding claims under the Medical Indemnity Scheme and Midwife Professional Indemnity Scheme which involves complex assumptions and judgements;
  • management of, and accounting for, a range of grant payments maintained through multiple systems and arrangements; and
  • accounting for the National Medical Stockpile. There has been a significant increase in purchasing and disbursement activity of items in the stockpile during the COVID-19 pandemic. The increase in purchasing activity over a relatively short time period increases the risk of the items in the National Medical Stockpile not being appropriately accounted for.

National Blood Authority

The National Blood Authority (NBA) is responsible for securing the supply of safe and affordable blood products, including through national supply arrangements and coordination of best practice standards within agreed funding policies under the national blood arrangements.

The NBA’s total budgeted expenses for 2019–20 are over $1.28 billion, with 99 per cent of these expenses attributable to supplier expenses and grants, as shown in Figure 3.

Figure 3: National Blood Authority’s total budgeted expenses by category ($’000)

 

Source: ANAO analysis of 2019–20 PBS.

The key risk for the NBA’s 2019–20 financial statements relates to significant judgements and assumptions involved in the valuation of blood and blood products, which are reported as assets.

National Health and Medical Research Council

The National Health and Medical Research Council (NHMRC) is the Australian Government’s key entity for managing investment in, and integrity of, health and medical research. NHMRC is also responsible for developing health advice for the Australian community, health professionals and governments, and for providing advice on ethical practice in health care and in the conduct of health and medical research.

NHMRC’s total budgeted expenses for 2019–20 are just under $926 million, with 94 per cent of these expenses attributable to grants, as shown in Figure 4.

Figure 4: National Health and Medical Research Council’s total budgeted expenses by category ($’000)

 

Source: ANAO analysis of 2019–20 PBS.

The two key risks for NHMRC’s 2019–20 financial statements are the:

  • management of, and accounting for, a range of grant payments that constitute a significant expense reported in NHMRC’s financial statements and are susceptible to fraud; and
  • judgements and assumptions involved in the management of non-financial and intangible assets, due to the development of a new grants management system.